Platform Innovation // Blog

How Walmart.com Can Woo Sellers onto Its Marketplace

In recent years, Walmart.com has emerged as a real challenger to Amazon’s retail marketplace. For decades, Amazon operated on the premise that by acquiring market share and growing from an online bookstore to the “everything” store, both buyers and sellers would be satisfied. Even better for Amazon, for a long time there was no real alternative to Amazon’s marketplace. If you didn’t like Amazon, but wanted a convenient online one-stop-shop, where else could you go?

Now, there’s Walmart.com. Buyers and sellers now have a choice between two enormous marketplaces, and can be wooed by more than just the size of the product catalog alone.

As Amazon private labels undercut third-party vendors, and its business practices invite criticism, Walmart is poised to benefit from an anti-Amazon stance. To reap the full benefits, Walmart must embrace a new corporate identity as a friend to sellers on its platform.

This narrative already played out between Uber and Lyft. When Uber’s low pay to drivers was exposed, Lyft positioned itself as a driver-friendly alternative. Many riders, outraged to learn that their drivers were underpaid, wanted to reward good behavior and punish Uber by choosing Lyft. Like Walmart, Lyft was far behind its dominant platform competitor – but by focusing on appealing to the supply side, it was able to gain back significant market share. While it would be a huge departure from its current relationship with most of its suppliers, Walmart could similarly befriend its supply, and hopefully charm some customers over in the process too.

Supply Side Online Marketplace Competition

Two-sided marketplaces have to meet the demands of two user types: buyers and sellers. In both cases, the size of the marketplace matters. Customers want access to a large catalog of products, and sellers want access to a large customer base. Once those criteria are met, secondary features of the platform come into play. Now the secondary concerns of vendors can be addressed, and other industries, such as B2B, can learn from the battle to come.

For sellers, transaction fees and data usage are very important. In a 2016 study by Web Retailer and Feedvisor, 64% of $1M+ sellers were concerned about Amazon selling their products, while 43% were concerned by high fees.

Because Amazon has long been using third-party vendor data from its marketplace to manufacture and sell its own private labels, sellers in particular are vulnerable to being poached. Walmart can win over supply by limiting the scope of the data it uses for its own benefit, and being transparent about how it uses data. A moratorium on data usage will never be practical, but vendors who feel empowered by the limits of data usage will have good reason to sell on Walmart.

Additionally, Walmart can incentivize sellers with more favorable transaction fees. Already Walmart charges lower fees than Amazon, but it can make a point of showing sellers just how much they’re saving with Walmart. Walmart’s subsidiary Jet.com already calculates for customers how much they save by buying on Jet.com. Walmart could do the same for its sellers.

Lastly, Amazon’s fulfillment services still outperform Walmart’s fulfillment options. Vendors on Amazon can either fulfill orders themselves, outsource fulfillment to a third party, or pay a fee to Amazon to store inventory in Amazon warehouses to be fulfilled by the tech giant directly.

According to the 2016 study by Web Retailer and Feedvisor, 79% of all sellers surveyed use Fulfillment by Amazon for some or all of their products sold on Amazon. Walmart doesn’t fulfill third-party orders directly, but does connect vendors to third-party fulfillment centers. If Walmart can improve its fulfillment services, it could satisfy both buyer and seller demand for speedier order fulfillment and shipment. It would also greatly lower the barriers to entry for sellers to join its marketplace.

Product innovation support

Moving beyond the tactics of marketplace competition, Walmart could drastically change the marketplace-seller relationship by fully becoming a champion of brand success. Many startup brands like Anker and Glossier are reaching younger, more niche consumers. Walmart could invest in a product innovation incubator to find the next Anker or Glossier. The incubator would then pair young brands with established brands who serve as advisors and mentors.

The Bridge by Coca-Cola (in partnership with Mercedes-Benz and Turner) presents one potential model. Coca-Cola and its partners provide promising startups with marketing, mentors, and business resources. The program does not require any equity from the startups. A product incubator headed by traditional companies could provide similar support for young product brands.

Depending on the deal, Walmart could be in a position to sell new brands exclusively for a short time both online and in stores. This conscientious expansion of its product catalog is crucial because millennials increasingly take brand values into account when making purchase decisions. Old brands aren’t aging as well, and through an incubator Walmart can ensure the trendiest products hit its shelves first.

Furthermore, the corporation would improve its own aging reputation by positioning itself as a pro-startup company. As it wins the brand image war against Amazon, Walmart can woo shoppers away from the modern monopoly too, just like Lyft did with Uber.

For more marketplace insights, join our platform innovation newsletter below.

Weekly Industry Newsletter

Top Posts

  • Platform Business Model – Definition | What is it? | Explanation

    Read more

  • Platform vs. Linear: Business Models 101

    Read more

  • White Paper: Development Platforms and the Next Wave of App Innovation

    Read more

  • Amazon Business: Understanding the Threat to B2B Distributors

    Read more

  • The Value of Digital Transformation: How Investors Evaluate “Tech”

    Read more

Read articles by